Wednesday, September 5, 2012

Lean times for Vélez

Vélez-Málaga Council is highly unlikely to be able to finance any more luxury or frivolous projects for the next few years after its debts to financial institutions, such as banks, have risen from €36 million last year to €78 million this year.
In fact, the Council is unlikely to be able to borrow any more funds at all from the banks until it reduces its current debt ratio.
The Central Government’s Payment Plan to allow municipal authorities to actually pay some of their suppliers for a change has added nearly €30 million to the municipal debts to banks.
 And not all suppliers were paid, there is still over €4 million outstanding.
Of the €78 million debt, €63 million is capital and €15 million is interest. 
The Payment Plan repayment system has a two year ‘grace period’, which means that most will not bother to start repaying significant amounts until 2014. 
However, this approach does mean that from 2014 the repayments will be on the high side.
The only way to finance large projects will be to persuade the Government to allow the municipalities to exceed the maximum debt ratio. 
Sanity and common sense, of course, dictates that this should not occur.
Thanks to Terry for this

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